Will Morrison's Covid strategy work out politically for the Coalition?
IT may be a tad too early to make any firm conclusions about the resilience of Australia's economy just because the latest quarterly economic report last week showed a modest 0.7 per cent growth.
Most of that growth, in the three months to the end of June, was the result of huge infusions of public expenditure. State governments have been splurging on new hospital equipment, railway lines and roads amounting to more than A$29 billion (S$28.9 billion). Without this public investment, there would have been zero economic growth, perhaps even a contraction.
The other major factor behind the growth figure was the pandemic itself. The states, which are responsible for delivery of health services, spent big by adding manpower for more medical services. To be sure, consumers spent record amounts on clothes, shoes and home office equipment. And the real estate market continued to be buoyant. But without the governments' decisive intervention in the economy, the picture would have been markedly different. It is also important to note that the latest scorecard is a backward look at economic performance. Now, both Sydney and Melbourne, which together account for more than half of the country's output, are in various stages of shutdown. Other cities have also had to impose shutdowns to keep a lid on the spread of the virus. No surprise then that economists now warn that the nation's GDP could contract by 3-4 per cent in the third quarter ending September.
Of course, Prime Minister Scott Morrison's Liberal-National Party coalition government is making the most of the report. His minister for the economy proclaimed that the economy was both strong and resilient, and even predicted that it would "spring back strongly once restrictions start to ease". In fact, the situation is becoming politically awkward for the government. The opposition Labour Party has painted the government into a corner by highlighting the blunders in its vaccination plan. So far, only about 37 per cent of the population over the age of 16 has been fully vaccinated. Australia's federal election must be held by the middle of 2022 and if the situation does not improve dramatically by then, the ruling coalition will face difficulties.
Mr Morrison's problem is that he had initially decided that, because the Covid infection case numbers were low, the government was not in a race to complete vaccination of the eligible population. It opted for AstraZeneca as the single vaccine for the country. Unfortunately, it turned out that this particular product was found to be unsuitable for people under the age of 50. Then there was a case of a 52-year-old women who died in June after getting the jab. It was then decided that the AstraZeneca jab should only be given to those over 60 years old. Since then, as the Delta variant took hold, policy prescriptions have changed several times. The government has since then rushed to increase the supply of other vaccines. The swap deal with Singapore is part of this process.
Although some states are holding out, Mr Morrison has now decided that it is no longer feasible to maintain a virus elimination strategy. He has decided that vaccinations are the only protection possible and has set a target of 80 per cent immunisation rate to put an end to all restrictions on travel and to re-open the country's borders. If everything goes according to plan, Australia should be able to resume normal life by the end of this year, he hopes. It remains to be seen if his strategy will work out politically for his coalition.
